Periodic pricing of seasonal products in retailing

Article Abstract:

A study examined intertemporal pricing policies in retail stores when seasonal products are being sold. A continuous time model that describes a seller expecting a stochastic arrival of customers with different valuations of the product is described. The structure of the optimal pricing policies is found to be consistent with actual procedures, with retail stores consecutively discounting the product during the season and promoting a liquidation sale at the end of the planning horizon. It is also demonstrated that the loss accrued when introducing periodic pricing reviews is small when the right number of reviews is made. Findings revealed that uncertainty in the demand for new products results in higher prices, greater discounts and more unsold inventory. Moreover, stores that announce discount policies on prices and profits typically establish prices that allow merchandise to be sold during the first periods and the largest discounts seldom occur.

Miscellaneous Store Retailers, MISCELLANEOUS RETAIL, Retail Trade NEC, Prices and rates, Retail industry, Retail trade, Pricing, Discounts (Sales)

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Optimal mailing of catalogs: a new methodology using estimable structural dynamic programming models

Article Abstract:

The major elements of the optimal mailing policy are considered in a dynamic setting where customers seek optimal utility and the direct mailer seeks optimal profits. An analytical model is developed to examine the use of feedback from customer responses in improving the mailing policy. The customers' purchase behavior is characterized as a function of the current and future mailing decisions in addition to the time interval since the latest responses and number of purchases. The model is applied to a database from a national cataloger selling nonseasonal products. The findings indicate that mailing to individuals at low recency levels is not optimal since these consumers are expected to make a purchase regardless of the mailing. The findings suggest that it is better to mail to individuals with higher recency levels to motivate them to buy repeatedly and not look for another cataloger.

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Mailing decisions in the catalog sales industry

Article Abstract:

Optimal mailing policies in the catalog sales industry when access to capital is limited are examined. Such policies play an important role in this business given the high cost of developing the house list, the company's list of customers and its most valuable asset. The manager has the responsibility of formulating a mailing policy, which addresses such issues as which rental lists to use, which customers on the lists should receive catalogs and how many catalogs to mail to a customer during a season. A model is developed for investigating the changes in the optimal solution as market conditions, such as prices, mailing costs, costs of goods and response rates, change. The model can also be used for risk analysis.

Direct Mail Marketing, Direct mail advertising, Catalogs

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